Among the G10 currencies, the USD/JPY pair enjoyed good two-way businesses in Asia this Monday, as the Yen caught a fresh bid-wave amid mounting US recession fears and the resulting risk-off slide in the Asian equities. However, the spot managed to attempt a corrective bounce from 6-week lows of 109.72 and reverted to the 110 handle, as the dovish comments by the Chicago Fed President Evans were offset by the recent speech by the BOJ Governor Kuroda.
The Aussie, on the other hand, kept the bearish bias intact amid looming US-China trade worries while the Kiwi traded better bid near 0.6880 region, despite the sell-off in oil prices and reduced appetite for risk assets. Both the European currencies, the EUR and the GBP, remained under pressure amid a lack of clarity on the Brexit issue that is likely to keep the investors on the edge this week. Meanwhile, gold prices on Comex hit the highest levels since February, 28th amid part US yield curve inversion while the Japanese benchmark, the Nikkei 225 index tanked nearly 3.50%, leading the sell-off across the Asian markets.
Main Topics in Asia
Key Focus Ahead
Today’s EUR macro calendar is a thin showing as we head into a fresh week, but the Brexit-related developments and central bankers’ speeches will continue to drive the sentiment across the fx space. On the data front, the German IFO business survey will drop in at 0900 GMT and that’s the only relevant release, as the UK docket remains data-empty.
The NA session also limited macro news, except for the second-tier releases in the Chicago Fed national activity index and Dallas Fed manufacturing business index, slated for release at 1230 GMT and 1430 GMT respectively. Later, towards NY closing, New Zealand’s trade report for the month of February will be published at 2145 GMT.
Following are the speeches due on the cards from the key central bankers’ from across the globe:
0630 GMT – BOJ'S Harada
0915 GMT – ECB's Costa
0930 GMT – ECB's Coeure
1000 GMT – Fed's Harker
2030 GMT: RBA's Ellis
EUR/USD closed well below 1.1312 (50% Fib R of 1.1176/1.1448) on Friday, confirming a bearish inside day reversal and was last seen trading at 1.13. The shared currency may fall further toward 1.1234 on recession fears and Brexit uncertainty.
Lack of data/event highlights the importance of the Fed members’ speeches and second-tier US data, coupled with mounting Brexit anxiety, as near-term catalysts.
GBP/USD could jump all the way to 1.4000 even in the uncertainty of new elections. Like the previous scenario, it may not come into fruition this week, but approving "indicative votes" could indicate the path higher for the pound.
Bond markets tend to give signals for the future. In the past, when the 3-month US Treasury yield became higher than the benchmark 10-year yield, it was an initial sign of a recession.